IPO of USA: Process, Advantages, and Challenges

Running Head: IPO OF USA 1
IPO OF USA
Student’s Name
Institutional Affiliation

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In the USA, Initial public offering assists a company in raising capital by giving out equity in a
public market or sharing stock. The reasons which make private corporations to go public
include;
I. The need for raising cash for debt reduction or expansion,
II. Confident primary investors like venture fund and angel investor would want to opt
out
III. Company going public can create buzz and might create brand or company
awareness.
IV. The CEO or shareholders may realize the value of unlocking their assets.
A private corporate should consider hiring an investments bank with a similar business segment
to value the business before going public. It's important to note that companies are always valued
depending on the multiples valuation of the business sector and the potent future earnings (Kooli,
& Meknassi, 2007). Also, the investment banks regularly discover the initial investors as well.
Prior to going public, a corporation should come up with catalogs with all the information related
to companies security, exchange commission (SEC) and the investors. Likewise a corporate must
file S-1 with SEC. This S-1 gives detailed info about the business financial statements, probable
threats, and strategy for the raised cash from the public offering (Hall, 2015).
The PWC claims that any corporate anticipating to go public should expect a 5-7 percent pay to
underwriters (Jain, & Kini, 2008)). Also, costs linked to accounting distribution, mailing, and
legal will be encompassed. Though, underwriters work on deciding the price to a maximum
profit, share allocation, and discovering the stock exchange list. For instance, in the US, every

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firm will strive to be listed on NASDAQ or NYSE because the markets are liquefied. (Greer &
Denison, 2016).
After all the processes, the CFO, CEO, the individuals related to investors commence roadshows
purposely to convey the mission, vision, and future panorama of the company to the potent
investors. After public awareness, each public firm files 10 Q quarterly with all the information
and annually the public corporates file 10-k. All the info's filed with SEC are for the public, who
might be the individual investors and investment firms (Kirby, & Meaning, 2015). Any public
corporate has to spend over 1.5 million dollars to conform to legal, regulatory, and financial
burdens. Therefore it is vivid that going public isn't that simple for any company, but, as per the
IPO process economist is the engine to capitalism (Mikkelson, & Partch, 2018).
When the family decided to go for public debt issuance they added more burden on themselves
than advantages since issuing debts come with more drawbacks as opposed to gains majorly the
family would run bankrupt, and the cash flows and collaterals for the loan would be their houses
and business this will still be a problem. However, offering common stock would be
advantageous and workable as it would help the family to reduce the debts. But, when they get
access to more mortgages by issuing common stock to the public, but additional obligations
would affect future grocery business earning negatively since most of the cash will be used for
debts repayments.
When a company issues stock to the public, it assists in raising funds. As a result, the capital will
be used in vast ways like the growth of a business, acquisition of another company, settling
debts, or accessing more money for common corporate purposes. Consequently, a company
should decide critically on whether issuing the stock to the public is worthy. Since when